The following are the advantages of double entry book keeping system:
1. Complete records of each transaction- It keeps the records of personal accounts relating to debtors and creditors as well as impersonal accounts relating to goods, profits, losses,etc. Thus, all the information regarding purchases, sales, expenses, incomes, profits, losses, debtors, creditors, etc. are available in this system.
2. Checking of arithmetical accuracy- Under this system, there is every debit amount for a credit amount, as a result, the total of all debits and all credits is equal. It can be tested by the preparation of trial balance from the ledger
balances. It helps to prevent frauds and manipulations.
3. Result of business- Since it keeps a complete records of business transactions, it is possible to determine the net profit earned or net loss suffered by the preparation of profit and loss account and income and expenditure account during the year.
4. Knowledge of financial position- It helps to know about the capital, liabilities and assets of a firm with the help of balance sheet prepared immediately after trading and profit and loss accounts. Moreover, it also helps to ascertain the amount of debtors and creditors.
1. Complete records of each transaction- It keeps the records of personal accounts relating to debtors and creditors as well as impersonal accounts relating to goods, profits, losses,etc. Thus, all the information regarding purchases, sales, expenses, incomes, profits, losses, debtors, creditors, etc. are available in this system.
2. Checking of arithmetical accuracy- Under this system, there is every debit amount for a credit amount, as a result, the total of all debits and all credits is equal. It can be tested by the preparation of trial balance from the ledger
balances. It helps to prevent frauds and manipulations.
3. Result of business- Since it keeps a complete records of business transactions, it is possible to determine the net profit earned or net loss suffered by the preparation of profit and loss account and income and expenditure account during the year.
4. Knowledge of financial position- It helps to know about the capital, liabilities and assets of a firm with the help of balance sheet prepared immediately after trading and profit and loss accounts. Moreover, it also helps to ascertain the amount of debtors and creditors.
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